If the person reported the phone stolen to the authorities, then it wouldn't be hard for the police to contact the proper owner so long as they also gave the police the serial number. One option would be to restore the phone to factory settings in order to get said serial number.

Doing such a thing without asking for reciprocation might go a long way towards building even more relationships and a bigger business for yourself. That's at least one way to go about doing things.

Doug